When To Take Social Security? Study takes a statistical approach.

[latexman]

This article takes an interesting statistical, back-testing approach to the much debated question of when/what age to claim Social Security.

An excerpt:

“Statistically speaking, there is a best age to claim Social Security benefits. In 2019, online investment management and financial planning company United Income released a study that analyzed the retired-worker claiming decisions of approximately 20,000 respondents using the University of Michigan's Health and Retirement Study.

The purpose of this analysis was to determine if these roughly 20,000 retirees had made an optimal claiming decision. For United Income, an "optimal" decision was one that resulted in the highest possible lifetime benefits for a claimant. Note, highest lifetime benefit may not be synonymous with highest possible monthly benefit.

What United Income's study showed was that claiming age and optimal claiming decisions were almost a perfect inverse of each other. In other words, there were very few optimal claims, with seniors regularly leaving large sums of Social Security income on the proverbial table.”

This approach is definitely not perfect. I think I’d prefer a more diverse, larger sample.

What do y’all think?

I’m trying to find the original study.

 

[latexman]

The study website is https://hrs.isr.umich.edu/about .

“The University of Michigan Health and Retirement Study (HRS) is a longitudinal panel study that surveys a representative sample of approximately 20,000 people in America, supported by the National Institute on Aging (NIA U01AG009740) and the Social Security Administration.”

Wow, there’s a lot there.

 

[qwerty3656]

The key line in the article (if you want to skip it):

the four best claiming ages, in order of optimal lifetime income, were 70, 67, 69, and 68

 

[RunningBum]

It's kind of click-baitish, in that they keep giving teasers but you have to keep scrolling through the article to the very end to get this:

For instance, only an aggregate 8% of the roughly 20,000 claims would have been optimal when taken at ages 62, 63, or 64. Though it can be tempting to get your hands on an extra source of income by age 62, United Income's study shows that very few early filers made a smart choice.

On the other hand, 57% of retirees would have generated the highest possible lifetime income from Social Security had they waited until age 70 to claim their benefit, according to United Income. Age 67 would have been optimal for around 10% of beneficiaries, so it was the second-best claiming age. In fact, the four best claiming ages, in order of optimal lifetime income, were 70, 67, 69, and 68. Waiting is the clear-cut smart move, based on this data.

Don't even bother clicking on some of the links they include in the article. They are pointers to other Motley Fool pieces using the same statistics, reworded.

 

[bobandsherry]

The key line in the article (if you want to skip it):

the four best claiming ages, in order of optimal lifetime income, were 70, 67, 69, and 68

And further.....

"But, as noted, there is no perfect blueprint when it comes to claiming Social Security benefits. Your decision will likely take your health, marital status, and financial situation, among other factors, into account."

 

[Montecfo]

so...it is what we already know. Most importantly, YMMV.

 

[FREE866]

I found that article extremely annoying
Conclusion seemed kind of vague complete with hedging statements that left me unconvinced of what to do.

 

[badatmath]

And further.....

"But, as noted, there is no perfect blueprint when it comes to claiming Social Security benefits. Your decision will likely take your health, marital status, and financial situation, among other factors, into account."

I didn't read the article but I would like to hear about those things. . . as they are probably what most people think about. If you are suffering health issues or broke that would seem pretty huge. And I'd like to hear how much of my assets I am to spend down while thinking it is a great plan. . .

 

[Midpack]

The links above leave a lot of open questions. The “original study” link below may be what the OP was looking for.

Bottom line, most people don’t start Soc Sec at the optimal age, most take it too early (see chart, though it doesn’t match text exactly). Most people do the exact opposite of their optimal WRT Soc Sec - that’s been well known (see quote).

https://maringroup.com/wp-content/uploads/2019/06/Retirement-Solution-Hiding-in-Plain-Sight.pdf

About 57 percent of retirees would build more wealth through their life if they waited to claim until they were 70 years old (when only 4 percent of retirees currently claim), while only 6.5 percent of retirees would have more wealth if they claimed prior to turning 64 (when over 70 percent of retirees currently claim benefits).

 

[jebmke]

Only skimmed. It seems to define "optimal" as getting the most money back. That isn't the only definition of optimal.

 

[W2R]

I think the study has a big flaw:

an "optimal" decision was one that resulted in the highest possible lifetime benefits for a claimant.

Often that is incorrect. In fact, if I dare, I'd say that is a stupid definition. For example, starving for 20 years so that you can buy mink coats and cadillacs when you are 95, is far from optimal. You all know what I mean. The value of money to any individual at various stages in life depends on a myriad of situational factors.

Age 70 was optimal for me (since I had sufficient nest egg to get me from age 62 to age 70 comfortably). Age 62 was optimal for Frank, since he would have had to keep working until SS kicked in. These examples show why I believe it is preferable for each future retiree to make these decisions personally, and for themselves, rather than relying on a dubious rule of thumb.

 

[Gremlin]

“What United Income's study showed was that claiming age and optimal claiming decisions were almost a perfect inverse of each other”

This would all be so much easier if I just knew exactly when I was going to die.

 

[Dash man]

Doesn’t an optimal age need to consider their age at the time of death? I took SS at 64 and 10 months because of my coronary artery disease. If I don’t live to the average age of a male, an earlier start date for SS would be earlier than someone who lives to 90.

 

[Born2Fish]

And further.....

"But, as noted, there is no perfect blueprint when it comes to claiming Social Security benefits. Your decision will likely take your health, marital status, and financial situation, among other factors, into account."

Well put!

At age 61 I quit working and claimed SS a few months later at 62.

If I had waited until FRA to claim SS then I would still be working now.

No regrets here...at all!

It's not all about having the biggest nest-egg to me. It's about having "ENOUGH".

 

[Midpack]

Doesn’t an optimal age need to consider their age at the time of death? I took SS at 64 and 10 months because of my coronary artery disease. If I don’t live to the average age of a male, an earlier start date for SS would be earlier than someone who lives to 90.

They do, that's why there's a range of optimals across all ages from 62 to 70 (see chart post #9). Problem is as others have noted, you can't know your optimal until you pass away - so the optimal are based on assumed longevities. It's up to you to choose which age you want to assume...

 

[Al18]

“ It seems to define "optimal" as getting the most money back. That isn't the only definition of optimal.”

I highly agree and pleased to see a lot of others on this are like minded. You can’t enjoy spending in retirement if you constantly think spending down your assets is a bad thing. The richest person in the cemetery is the loser who never figured this out.

 

[walkinwood]

I haven't read the article yet.
Is there any mention of married couples & their results?

 

[pb4uski]

I think the study has a big flaw:







Often that is incorrect. In fact, if I dare, I'd say that is a stupid definition. For example, starving for 20 years so that you can buy mink coats and cadillacs when you are 95, is far from optimal. You all know what I mean. The value of money to any individual at various stages in life depends on a myriad of situational factors.



Age 70 was optimal for me (since I had sufficient nest egg to get me from age 62 to age 70 comfortably). Age 62 was optimal for Frank, since he would have had to keep working until SS kicked in. These examples show why I believe it is preferable for each future retiree to make these decisions personally, and for themselves, rather than relying on a dubious rule of thumb.

If one has no other choice but to take SS at a certain age like many people do, then one isn't really choosing.

The study defines optimal as lifetime income and presumes that the subject has a choice, so I don't think of it as a flaw.

 

[latexman]

”Your decision will likely take your health, marital status, and financial situation, among other factors, into account."

Fully agree!

But if one has the luxury to optimize SS, the article does align with other references to delay taking SS.

 

[latexman]

This would all be so much easier if I just knew exactly when I was going to die.

Ain’t that the truth!

All we can do is make the best estimate of our longevity and roll the dice.

 

[youbet]

I don't see any recognition given to the "time value of money" in the study.

 

[reneeh63]

I think the study has a big flaw:



Often that is incorrect. In fact, if I dare, I'd say that is a stupid definition. For example, starving for 20 years so that you can buy mink coats and cadillacs when you are 95, is far from optimal. You all know what I mean. The value of money to any individual at various stages in life depends on a myriad of situational factors.

Age 70 was optimal for me (since I had sufficient nest egg to get me from age 62 to age 70 comfortably). Age 62 was optimal for Frank, since he would have had to keep working until SS kicked in. These examples show why I believe it is preferable for each future retiree to make these decisions personally, and for themselves, rather than relying on a dubious rule of thumb.

The main issue is that people either don't have the money to fully fund their own retirement until age 70 or they can't stand the idea of spending down their own money and waiting, even if they can afford it. I fully intend to retire at 62 and spend down as needed until age 70 - my standard of living will be the same, regardless of whether I'm collecting SS or using my own stash.

 

[oldtimer]

I don't see any recognition given to the "time value of money" in the study.

+1

 

[latexman]

I don't see any recognition given to the "time value of money" in the study.

True, but then there is opensocialsecurity.com to fine tune your personal situation on that.

 

[Z3Dreamer]

I don't see any recognition given to the "time value of money" in the study.

+2